WOW: What a week for folks who are looking for ways to bailout their family from the underwater mortgage mess. The tide may be turning.
This third week of March 2010 will long be remembered for when tides started to truly turn for those families with underwater mortgages. First, of course the historic health bill was passed by Congress and signed by the President.
Then, Bank of America announced that they would actually reduce principal up to 30% on some 40,000 underwater mortgages. While the news was encouraging for those who would qualify, it represented less than 1% of all mortgages underwater and seems to be merely a indication for other news to follow. http://www.nytimes.com/2010/03/25/business/25housing.html
Obama Admits Problem, Plan Not Working
But then the Obama Administration today finally announced and acknowledged that their original loan modification program designed to help millions only helped maybe 200,000 people.
Government Plan B
Most importantly, however, the government is unveiling a program that will…we hope… truly encourage banks to begin modifications and refinances with significant principal reduction. http://www.nytimes.com/2010/03/26/business/26housing.html?hp Up until now principal reduction claims on mortgage modifications were made by late night cable TV ads, by national modification scamsters and for the most part became at best urban legend.
As we have discussed on the South Florida Law Blog for more than a year, a government program modeled after the programs during the Depression Era is the most likely way to stem the foreclosure crisis. Here in South Florida, only 15% of all foreclosure properties have hit the streets. Either the banks are holding off on putting the inventory back on the streets (creating a shadow inventory) or the foreclosures have yet to be finalized by the courts. Either way, the continuous flow of distressed properties will not let the market return to anything orderly even if you have on-line foreclosure sales and triple the number of buyers which has happened in some counties, like Miami-Dade County, Florida.
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Short sales have emerged as the best option for most South Florida homeowners when it comes to defending foreclosure and avoiding costly deficiency judgments, according to real estate attorney and legal blogger Roy Oppenheim.
